Customer satisfaction, net income and total assets: An exploratory study

Abstract

Conventional wisdom believes that customer satisfaction has a positive effect on profitability, normally measured in such terms as return on assets (ROA). It is not, however, clear whether customer satisfaction has a current effect or a lagged effect on profitability — an issue of importance but largely neglected. The authors fill the void by examining how current and past satisfaction performance affects net income (profit) and total assets because ROA is a ratio of net income to total assets. Results show that current customer satisfaction performance is negatively related to both net income and total assets, while past satisfaction is positively related to net income, but bears no relationship to total assets. Taken together, although it is still mathematically possible that current satisfaction is positively related to ROA, it is more probable that current satisfaction has a negative effect on profitability, while past satisfaction has a positive effect on profitability. That is, customer satisfaction performance has a lagged effect on profitability.